More capacity needed for harvest supply chain, ADM official says

Thursday, May 30, 2013

The massive agriculture processor Archer Daniels Midland Co. continues to heavily invest in transportation infrastructure to move commodities around the world and expects governments and its business partners to make similar investments to support the harvest supply chain as the global population grows, according to a key company official.
In an address at the Virginia Maritime Association's annual banquet in Norfolk earlier this month, Mark Schweitzer, managing director intermodal and international freight, said the transportation industry has to collaborate even more and will require substantial infrastructure improvements to keep pace with anticipated production growth to move more farm products further and faster than before.
"An ever-growing world requires investment in transportation and logistics operations as much as food production and processing to ensure that we are moving our products efficiently," he said.
The Port of Virginia is a major gateway for ADM grain exports and Schweitzer praised the state for its foresight in developing a 50-foot navigable channel capable of handling deep-draft vessels years ahead of other ports on the East Coast. The Hampton Roads port complex is the only East Coast port with unobstructed deep-water access to all its terminals. The Army Corps of Engineers is expected to complete dredging the last sections of the Port of New York and New Jersey to 50 feet in the next year, but many of the larger vessels won't be able to reach several terminals until the raising of the Bayonne Bridge is complete, possibly as early as 2015. The Port of Baltimore has 50-foot access in its main channel and at several bulk facilities, but only at one container terminal. And excavation down to 50 feet will begin this summer at the Port of Miami.
"At ADM, we see deep water as key to meeting future demands," Schwartz said. "We appreciate it when we see strategic partners like the Port of Virginia, along with the state, matching these infrastructure investments. By investing together and focusing on the needs of our region and global customers we'll continue to meet and exceed any demand."
Draft is important to agricultural shippers because grain and other ag products are extremely heavy and cause vessels to ride lower in the water. Without adequate depth, vessels cannot load cargo to the maximum extent possible and lose potential revenue.
ADM is a vertically integrated conglomerate with its own transportation network that handles everything from trading, processing and storage. It exports grains, oil seeds, cocoa, corn sweeteners, soy proteins, vegetable oils, packaged food ingredients and biofuels in containers and bulk vessels for food and animal feed, as well as industrial and energy uses. The Decatur, Ill.-based agribusiness operates more than 265 processing plants and has 460 crop sourcing facilities around the world. It owns or leases 2,400 barges, 26,900 railcars, 400 trucks and 1,400 trailers and 38 oceangoing vessels, according to an ADM fact sheet posted on its Website.
Last year, the company had net sales of $90.6 billion.
The global population is projected to reach 8 billion by 2030, with the middle class expanding to 5 billion people. Feeding all those people will require food production to increase by 70 percent and transportation capacity to handle the increased shipping needs, Schweitzer said.
ADM investments to support its supply chain include expansion of its barge operations along the Danube River in Europe, building a port in Uruguay and constructing new bridges in the Ivory Coast to help get cocoa from farm to market. The company is also advocating the U.S. government to provide more funding to maintain inland waterways, where sediment buildup and lock malfunctions often impede traffic.
Construction of the port terminal at Nueva Palmira, Uruguay, is wrapping up. The facility will be used to ship corn, soy, wheat and soybean meal in post-Panamaz and Cape-size vessels to Europe, Asia, Latin America and Africa. It is expected to handle 2.8 million metric tons of goods in its first year of operation.
On May 1, ADM announced its intent to buy GrainCorp, a large Australian grain handling and processing company in which it already has a minority stake, for about $3.3 billion. GrainCorp is the largest grain exporter in eastern Australia.
One of ADM's major domestic investments has been in a new rail and intermodal yard at a large manufacturing complex in Decatur. ADM recently consolidated multiple rail yards for the Norfolk Southern, Canadian National Railway and CSX into a central yard between its two primary plants and took over switching operations from the railroads. ADM contracts with Railserve Inc. to load and unload railcars, and build and move trains in and out of the sidings to the mainlines, Schweitzer said after his speech.
Late last year, ADM added an intermodal yard to improve the efficiency of handling containers without the need for trucks to connect with rail carriers. The intermodal ramp is operated by Container Port Group, he said.
Less than 1 percent of ADM's volume is moved in containers, but when ADM noticed the trend toward increased use of containers to ship specialized grains or to reach ports without adequate bulk transportation facilities it decided to invest in an inland port. The facility has annual capacity of 60,000 lifts.
"The complex provides us a unique opportunity to serve any customer anywhere, anytime and be more involved in every aspect of supply chain management to ensure consistent, on-time shipments and make certain that our customers' needs are met efficiently.
"We want to be as effective as anybody in the United States when it comes to getting freight anywhere in the world," Schweitzer told the crowd in Norfolk.
ADM is now sending unit trains of grain to the Port of Virginia and taking advantage of the larger vessels that ocean carriers are starting to deploy. The intermodal facility is also benefiting railroads, ocean carriers and shippers by providing revenue-producing, outbound loads for import containers arriving in the Midwest, thereby reducing the round trip cost.
Having a dedicated intermodal ramp allows ADM to quickly re-route trains if any ports face disruptions of any kind, Schweitzer added.
The Port of Virginia is a key cog in ADM's supply chain, he reiterated.
"Your strategy of wider, deeper, safer fits our scope and scale. Your location and relation to highway, rail and international waters is outstanding. You're nearly equidistant from Shanghai and Hong Kong from either the Panama Canal or the Suez Canal. Your operations are efficient. Your flexibility to arbitrage and your commitment to your customers are second to none," Schweitzer said. - Eric Kulisch